The U.S Securities and Exchange Commission charged Goldman Sachs with defrauding investors by misstating key facts about financial products tied to subprime mortgages, during the collapse of housing market. Goldman Sachs is a Wall Street titan and has remained the most successful firm in Wall Street bank for a long time. Though the U.S government has criticized it for misleading its clients, it remains the firm that has sold the maximum number of securities when the house market collapsed. As the markets of the loans were beginning to weaken, Goldman was busy making, buying and building complex investments. While other firms suffered losses, Goldman made profit in billions during the house market collapse. However, the firm projected to its investors and client a loss of $90 million. The company has put its own interest, before its clients. (Sec.gov)
Goldman was alleged of creating a collateral debt obligation called Abacus 2007-AC1. The client who invested in this suffered huge loss as the mortgages in this package was later downgraded. The firm attributed the downfall to a turbulent economy, but in fact, it was largely their own making. The client’s loss accounted to a total of $1billion dollar during this downfall. Goldman’s financial advisors have led these clients into buying securities that they knew is sure to fall. Goldman has been setting up the firm’s own securities to fail and betting secretly against those securities as if to help the client. This revelation of Goldman’s true face came as a shock to its investors. Though it is difficult to prove such behavior of the firm as illegal, it is unethical and has affected the firm’s credibility and reputation. (Lennick and Kiel)
References:
Lennick, Doug, and Fred Kiel. Moral Intelligence 2.0. Upper Saddle River, N.J.: Prentice Hall, 2011. Print.
Sec.gov,. 'SEC Enforcement Actions Addressing Misconduct That Led To Or Arose From The Financial Crisis'. N.p., 2015. Web. 11 July 2015.
